Multiple channels for online branding.

Schneider, Gary P. ; Bruton, Carol M.

ABSTRACT

Companies have been doing brand development for physical world products and services for many years. These experiences have led to a body of generally accepted approaches and processes that constitute the activity called brand building. In recent years, both new and existing companies have undertaken the task of building new brands for their online offerings. This paper examines the new approaches that are being used alone and in combination with existing approaches to build online brands.

INTRODUCTION

This paper examines a multi-channel approach to building online brands that combines the time-tested methods of brand building that have been used for years for products in the offline world (Neuborne & Hof, 1998) with some new techniques that have been developed to exploit opportunities in the online world (Dennis, 2001; Kalin, 2001; Pastore & Saunders, 2001). The paper uses publicly available information about two online businesses, RedEnvelope.com (Helft, 2001) and Kozmo (Blair, 2001), to illustrate this multi-channel approach. The use of these two companies allows us to contrast a successful application of the approach with a less-successful application (Schneider, 2003). The comparison provides lessons for marketers and suggestions for future research.

JUST ANOTHER WEB GIFT SHOP

In September 1997, a new gift shop opened for business on the Web. Of course, in 1997, there were already many gift shops on the Web. Thus, this new store needed to create a new and distinctive brand. Since this store carried items that were chosen specifically to meet the needs of last-minute gift shoppers, the owners decided to call it 911 Gifts.com. By using 911, which is the emergency telephone number used in most parts of the United States, in the store's name, the owners hoped to convey the impression of crisis-solving urgency (Marschak, 1998).

The company's two major strengths were its promise of next-day delivery on all items and its site layout, in which gift selections were organized by holiday rather than by product type. Thus, the harried shopper could simply click the Mother's Day gifts link and view a set of gift choices appropriate for that holiday that were ready for immediate delivery. The site also included a reminder service, called GiftAlert, so that its customers would not find themselves in an emergency gift situation on the next holiday (Marschak, 1998).

A NEW NAME, A NEW BRAND

By 1999, the company had 90,000 customers signed up for GiftAlert and was doing about $1 million in annual sales. It carried about 500 products, and each of the products was chosen to yield a gross margin of at least 40 percent (Marschak, 1998). 911Gifts.com was a successful business, but without additional capital to build the company's brand, future growth would be difficult. To take the company to the next level, the company hired Hilary Billings, a retail marketing executive whose experience included building the Pottery Barn catalog business at Williams-Sonoma. Billings undertook a complete reevaluation of the 911Gifts.com marketing plan and, after revising it, took it to investors and raised over $30 million for a rebranding and complete overhaul of the company's Web site. In October 1999, the new brand was born as RedEnvelope. In many Asian countries, gifts are sent in a simple, red envelope. The new brand was designed to create a sense of elegant simplicity to replace the sense of panic and emergency solutions conveyed by the old brand name (Helft, 2001). The product line was revamped to fit the new image as well. About 300 products were dropped and replaced with different products that focus groups had judged to be more appealing. The new product line had an even higher average gross margin than the old line (RedEnvelope, 2001).

MULTI-CHANNEL BRAND BUILDING

Billings launched a massive brand-awareness campaign that included online advertising, buses in seven major cities painted red and festooned with large red bows, and print advertising in upscale publications. The most important change in advertising strategy was the launching of a print catalog (Helft, 2001). RedEnvelope's use of multiple advertising channels (including some old-fashioned offline channels) was unusual for a dot-com company at that time (Clarkson, 2001; Dennis, 2001; Miles, 2001). RedEnvelope catalogs are mailed to customers to coincide with major gift-giving holidays and serve as additional reminders. Because RedEnvelope sells a small set of products that are chosen for their visual appeal and for the status they are intended to convey, the full-color, lushly illustrated print catalogs are a powerful selling tool (Hoffman & Novak, 2000; Koprowski, 1998).

One year later, the results of this extensive makeover were clear. RedEnvelope had tripled its number of customers and had increased sales by over 400 percent (RedEnvelope.com, 2001). The company chose a specific part of the gifts market and targeted its offerings to meet the needs and desires of those customers. The company created a brand, a marketing plan, and a set of advertising and promotion strategies that would expose the company to the largest portion of that market it could afford to reach. RedEnvelope matched its inventory selection, delivery methods, and marketing efforts to each other and to the needs of its customers. This integration of operations and strategy is especially important for online businesses (Geyskens, Gielens & Dekimpe, 2002; Grebb, 2001; McWilliams, 2002).

DIGITAL PROMISES

One of the most important elements of any brand, online or offline, is the promise imbedded in the brand. Dayal, Landesberg, and Zeisser (2000) argue that online promises, which they call "digital promises," are at least as important as explicit or implied promises made using traditional advertising and promotion channels. RedEnvelope.com's main digital promises were convenience and reliability. Customers would know that they could rely on RedEnvelope to have a last-minute gift available that was of high quality and that RedEnvelope would deliver it on time to the recipient. The company used traditional methods (focus groups and questionnaires) to obtain knowledge about its customer needs (Lochridge, 2001). RedEnvelope had to make adjustments to its business model (changing its product mix and its online catalog presentation) to ensure that this promise was consistent with what it could deliver. Business model changes are often required to accomplish this (Dayal, et al., 2000; Jarvis, 2002).

A CONTRASTING CASE

Kozmo was launched in 1998 to meet the needs of New York City denizens who were in their homes late at night craving videos and snack foods. With its orange-jacketed delivery persons riding bicycles or motor scooters, Kozmo promised delivery of most items within an hour of ordering. Kozmo did not offer as wide a range of items as most convenience stores sold, so its main competitive advantage was its delivery service. Kozmo attempted to become profitable by adding high-margin items such as DVD players and Sony PlayStations and by expanding its delivery areas to include higher-income neighborhoods. In addition to Manhattan, Kozmo opened operations for a short time in Houston and San Diego. In these cities, the higher average distances between deliveries made it even more difficult for Kozmo to cover its operating costs (Blair, 2001).

FAILURE TO DEVELOP BRAND

Despite its best efforts, Kozmo was unable to create a brand image that was much different from that of a convenience store on wheels. Kozmo found it difficult to convince customers that having snack food items and videos delivered made those items significantly more valuable. Most of Kozmo's product line consisted of items for which most people were accustomed to paying low prices. Kozmo lacked the integration of customer needs, a brand that communicated an ability to satisfy those needs, and a set of operations that, in fact, fulfilled those customer needs. Kozmo's failure to integrate (Grebb, 2001; McWilliams, 2002) would prove to be fatal to the company.

DEATHBED INTEGRATION ATTEMPT

In March 2001, just one month before closing operations, Kozmo announced a marketing plan that included spending $2.5 million to print and circulate 400,000 catalogs (Blair, 2001). The plan was a last desperate attempt to increase brand awareness, gain new customers, and convince people who did not have an Internet connection to use Kozmo's phone order service. Unlike RedEnvelope, however, the Kozmo catalog was not a part of an integrated business plan. Kozmo's tactic did not provide the same kind of added value that RedEnvelope's catalog provides. Unfortunately, a bag of potato chips does not gain much appeal by appearing in a full-color catalog photo.

CONCLUSION: LESSONS LEARNED

Kozmo's experience illustrates that using one element from a branding strategy that has worked for another company is not a magic key to success. Branding techniques are effective only when implemented as part of an integrated strategy that fits the company's products and gives customers a compelling reason to buy (Grebb, 2001). RedEnvelope found that a print catalog could be an integral part of branding and promoting its online sales. However, a print catalog is only a good idea if it provides customers with recognizable value and augments the rest of the company's branding strategy.

FUTURE RESEARCH

The elements of offline branding strategies are well understood and have been used successfully by many companies for many years. The use of new online information delivery approaches has been the subject of some research (Moffett, Stone & Crick, 2002), but not much has been done regarding the integration of the new and old approaches. Also, the use of older approaches to enhance the branding of new online businesses has not been studied carefully. These are two areas of research that could produce useful results that could be applied by practitioners as they move forward in the brave new world of integrated online branding.

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Gary P. Schneider, University of San Diego Carol M. Bruton, California State University San Marcos